\endinput: what is it for?

Here's a case where \endinput might be useful. Suppose I'm writing a textbook and that each chapter ends with problems followed by their solutions. I want to build two separate editions: one for students, without solutions, one for teachers, with solutions.

I can define a conditional, say \ifstudents, with

\newif\ifstudents
%\studentsfalse % this is implicit
%\studentstrue % uncomment for the students' version

in the preamble, and prepare my chapters as

<text>
\section*{Problems}
<problems>

\ifstudents\endinput\fi

\section*{Solutions}
<solutions>

Now it suffices to switch \studentsfalse (for the teachers' edition) and \studentstrue (for the students' edition).

An important feature of \endinput is that TeX continues to read to the end of the line where \endinput appears (when it is expanded), so something can follow it and be read nonetheless. The following would be equivalent

\ifstudents
  \expandafter\endinput
\fi

Forgetting the \expandafter would cause an "incomplete conditional" error message.

No, you don't need it.

\endinput is used for terminating the input process in the middle of a file. A \endinput at the end of a file is useless (and harmless).

Some people like to use \endinput to show the end of file explicitly. IMHO, it make no sense.

The \include macro uses the \input macro internally to read the given file. The \endinput macro simply ends the input of this file, i.e. allows you to have everything afterwards ignored and return to the parent file immediately. As Herbert already stated this is useful for package or similar files which have its documentation in them and place them just after \endinput so is isn't interpreted it as LaTeX code.

For own chapters inside \included file \endinput can be useful if you want to temporary ignore a trailing portion of this chapter. Together with \includeonly it allows you to produce a partial PDF just holding e.g. the first section of a chapter. This can be very useful in the writing phase e.g. if you are supposed to sent such a part of your document to another person for review.

AFAIK the guide for LaTeX package authors states to end class and package files with an explicit \endinput. I personally find it good programming style. I also remember hearing about some tricks which require an explicit \endinput in the file they process, which I think is then temporary redefined.

In summary, you don't have to worry about \endinput. It's totally fine if you don't use it at all.